China’s quest to make global brands held back by rigid state

Selling Chinese-label goods at home is one thing, but to shed the stigma the ‘Made in China’ label has abroad and gain global recognition, the country must rediscover the arts of creativity and risk-taking

By Jonathan Kaiman / The Observer, BEIJING

Among China’s biggest hopes for a global breakthrough is car maker Chery, founded in 1997. Its most popular model is the QQ City Car, a pod-like hatchback that seems ubiquitous among China’s middle-class families. The company has established joint ventures with a number of foreign brands, including Jaguar Land Rover and in 2011 it exported about one-quarter of its production total.

Yet Chery has yet to create an image that will turn heads in New York and London.

“While Chery is enhancing its hard power actively, it also pays close attention to fostering soft power,” the company’s English-language Web site boasts, taking a cue from the country’s diplomatic rhetoric. “With vigorous culture of innovation, Chery has realized the great-leap-forward development and has received deep concern and great attention from the leaders of the country and the [Chinese Communist] Party.”

Skeptics say that Chinese brands like Chery will never surpass foreign rivals unless they can embrace fundamental principles of innovation — like open communication, risk-taking — that require more than cash. This extends to creative industries, such as music, film and fashion.

“We get these endless things from the government saying there should be more innovation and brand building,” said Paul French, chief China market strategist at market research firm Mintel. “But there isn’t anything behind it. The problem is that no one really wants to invest in innovative design. It’s very market-led. So if reports come to the stores that red shirts are selling, they’ll tell their in-house designers to design more red shirts. This means the designers don’t get a chance to do anything.”

“I don’t think anyone in government understands creative industries,” French added. “They spent 60 years driving creativity out of the system. To reintroduce it in 10 minutes is a bit hopeful.”

Chinese companies are trying to buck that trend. For instance, Huawei, the world’s largest telecom equipment maker, headquartered in Shenzhen, has more than 140,000 employees, nearly half of whom work in research and development. The company applied for 54,000 patents last year, 14,000 of them outside China.

However, judging by Huawei’s sometimes faltering progress, Chinese technology upstarts will struggle to make inroads into Western markets because of the political problems they face. Huawei has been barred from operating in the US because of security concerns and its UK operations are the subject of a review by British National Security Adviser Sir Nigel Kim Darroch.

Baidu chairman Robin Li (李彥宏), who heads China’s leading search engine, announced a plan to crack the Japanese market in 2007. Last year, when diplomatic tempers flared amid a territorial dispute over a series of islands in the resource-rich East China Sea, Baidu’s main page displayed a cartoon illustration of the islands beneath an oversized Chinese flag. Japanese consumers were incensed. The company has lost more than ￡60 million on the project.